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Health care guide to debt limit battle

Doctors are breathing easier now that Congress has averted cuts in their Medicare payments. | AP Photo

Obama suggested dual-eligible rebates in his deficit-reduction plan last year, after it was also proposed by his deficit commission. And during the 2011 debt ceiling negotiations, some Republicans indicated possible support for the idea as long as it was part of a whole package, while Democrats were divided over the issue.

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Companies have paid a Medicaid drug rebate for years, and that was recently increased under the health care law. The law also instituted a new rebate to help close the “doughnut hole” — the gap in Medicare prescription drug coverage — and an industry fee based on each company’s annual revenues.

In total, the health care law is expected to cost the drug industry about $85 billion over 10 years, according to Moody’s Investors Service analysts.

Insurers

The insurance companies are most concerned about seeing cuts to Medicare Advantage and Medigap plans — two programs that don’t have a lot of friends among Democrats.

The White House, the Simpson-Bowles deficit commission, the Medicare Payment Advisory Commission and the CBO have all recommended some version of restricting Medigap plans, typically by applying a penalty to plans that provide coverage for the “first dollar” of care. Their argument is that consumers need to have to pay at least something toward their care — otherwise, they would agree to any test or treatment, no matter the cost.

The CBO would go the furthest of all proposals, and actually ban Medigap plans from offering coverage for a beneficiary’s first $550 of out-of-pocket spending. That would save $53.4 billion.

Insurers also don’t want to see more cuts to private Medicare Advantage plans, which are already facing deep reductions from the health care law as well as a smaller hit in the fiscal cliff deal. Previous deficit-reduction proposals have weighed introducing new audits into Medicare Advantage or repealing bonuses for quality.

Odds and ends

Many other parts of health care have been mentioned for cuts, particularly the home health and nursing home sectors. In particular, many deficit-reduction plans have called for requiring great cost-sharing for home health services, rehabilitative therapies or a stay at a nursing facility. Others have called for more competitive bidding on medical equipment or reducing payments for clinical lab treatments and advanced imaging tests.